On Monday, regional currencies closed mostly weaker. Rather unusually, the Czech koruna led losses and edged to 25.10 EUR/CZK. Apart from the Czech macro-figures, comments made by Poland’s deputy Finance Minister Dominik Radziwill are worth noting. He said that the ministry is about to exchange US dollars (2 billion USD) obtained in recent dollar-denominated auction for zlotys. Moreover, he further supported our view that the koruna might weaken against the zloty in months ahead as he said that the ministry will probably sell euros from the EU funds towards the end of this year. Let us remind that about one quarter of Poland’s debt is denominated in foreign currencies and such a move is expected in order to keep debt-to-GDP ratio below 55% threshold.
Today, October’s Czech retail sales and unemployment were released. Retail sales surprised negatively in September whereas the unemployment surprised fell to 7.9 %. Regarding the former, the figure confirmed that household’s consumption maintain rather a negative trend and will likely do so in months ahead due to low consumer confidence. As far as the latter is concerned, we expect that unemployment rate will increase in months ahead and in the end of this year might reach 8.5 %.
As regards the outlook for CE currencies, political event-risks in the euro zone remain high. Therefore, we revise our forecasts for CE currencies towards weaker values for the rest of this year. We think that the Czech koruna might underperform its peers in weeks ahead as it can’t count on the CNB’s interventions. Thus, we would not be surprised if the koruna temporarily tested 26.0 EUR/CZK level.